How to calculate Capital Contributions to an LLC?

[Mark Andrews]

Hi all,

How would you record the "Capital Contributions" to an LLC in the ledger section for the following scenarios:

Scenario 1: Let's say the equity in the property is $60K and mortgage is $140K before the transfer. I deed the property into the LLC and don't change anything else. Would the Capital Contributions just be $60K?

Scenario 2: [Assume the numbers are the same as above] What if the LLC has myself and another family member as 50/50 partners? Would my Capital Contributions equal $60K and the other member's Capital Contributions equal $0 (since technically it was bought using my money)? Or would both of our Capital Contributions be $60K since we would both own the rights to the same property (with $60K equity)?

Also, would a CPA be more suited to answer this question rather than a real estate attorney? Any insight would be appreciated. Thanks.

[Chris Seveney]

1. Yes a CPA is suited for this.

2. We would not put equity into the ledger. The capital contribution in the LLC would be the amount of cash you placed in the LLC. Whether its one person or five people, capital contribution is the cash amount.

bonus: by deeding into the llc you most likely will have zero asset protection because it was not an arms length transaction.